Oil Rises for First Time in Six Days on Signs of Growth

By Mark Shenk -
Oct 25, 2012

Oil rose for the first time in six
days in New York, ending the longest losing streak since May, on
signs that that U.S. economic growth is accelerating and
speculation the Bank of Japan (8301) will increase stimulus.

Futures advanced 0.4 percent after reports showed U.S.
jobless claims dropped last week and durable goods orders gained
in August. The Commerce Department will probably report that
growth increased in the third quarter, according to a Bloomberg
survey. The Nikkei newspaper reported the Bank of Japan will add
to its asset-purchase program.

“Today’s data was modestly positive and tomorrow’s GDP
number should be positive as well,” said Jason Schenker,
president of Prestige Economics LLC, an Austin, Texas-based
energy consultant. “It appears that the economy is expanding
moderately. This is supportive for oil.”

Crude oil for December delivery rose 32 cents to settle at
$86.05 a barrel on the New York Mercantile Exchange. The
contract settled at $85.73 yesterday, the lowest since July 10.
Prices are down 13 percent this year.

Brent oil for December settlement increased 64 cents, or
0.6 percent, to end the session at $108.49 a barrel on the
London-based ICE Futures Europe exchange. It was the first gain
in eight days, ending the longest losing streak since July 2010.

The European benchmark crude oil settled at a $22.44
premium to West Texas Intermediate grade traded in New York, up
from $22.12 yesterday.

Jobless Claims

Unemployment claims decreased by 23,000 to 369,000 in the
week ended Oct. 20 from a revised 392,000 the prior period, the
Labor Department reported in Washington. The median forecast of
48 economists surveyed by Bloomberg called for a drop in claims
to 370,000.

Demand for durable goods climbed 9.9 percent last month, a
Commerce Department report showed. The median forecast of 77
economists surveyed by Bloomberg called for a 7.5 percent gain
in orders.

The economy grew at a 1.8 percent annual rate in the third
quarter after expanding at a 1.3 percent pace the prior three
months, according to the median forecast of economists surveyed
by Bloomberg. The Labor Department’s October employment report
will be released Nov. 2, four days before the U.S. presidential
election.

“We should expect some sideways trading until we get
through some important events ahead,” said Tim Evans, an energy
analyst at Citi Futures Perspective in New York. “There are the
GDP numbers on Oct. 26, the October jobless figures on Nov. 2
and then the election on Nov. 6.”

Tight Race

Polls show challenger Mitt Romney leading President Barack Obama by 0.7 percentage point in the popular vote. The
candidates are racing to campaign in as many of the electoral
battleground states as possible with less than two weeks before
Election Day.

Nikkei said Japan’s central bank will consider increasing
its asset-purchase program by 10 trillion yen ($125 billion) to
90 trillion yen at an Oct. 30 meeting. The U.S. Federal Reserve
yesterday said it will maintain stimulus after last month
committing to a third round of bond buying to bolster growth.

Japan’s Economy Minister Seiji Maehara, who has been
calling for more action from the central bank, said earlier this
week that he may attend the meeting. He was present at the
central bank’s previous gathering, the first minister to do so
for more than nine years.

The Asian nation is the third-biggest oil consuming
country, responsible for 5 percent of global demand in 2011,
according to BP Plc (BP/)’s Statistical Review of World Energy. The
U.S. and China, the two largest consumers, used a combined 32
percent of the world’s supply last year.

Overextended Market

“The rally began with the Nikkei report that the Bank of
Japan may be boosting stimulus,” said Addison Armstrong,
director of market research at Tradition Energy in Stamford,
Connecticut. “The market definitely looked overextended to the
downside after falling for five days.”

Oil rebounded in New York after yesterday’s drop sent the
relative strength index to 31.57, the lowest level since June
28. Crude climbed from a nine-month low in June when the RSI
slid below 30, signaling the market was oversold. Today’s
reading was 33.17.